Caption: The value of intangible assets and data security go hand in glove.
It used to be vaguely referred to as ‘goodwill’ on the balance sheet of a company. But in today’s data-driven environment, companies are taking a closer look at the value of intangibles like brand and data to their company.
Take Apple as a sophisticated case in point. In 2015, Apple’s accounts showed tangible assets of $290 billion, and about $141 billion of intangible assets.
To backtrack a little, around the turn of the millennia companies started to think specifically about brand value as a specific intangible. For example, the consultants said, if one took a generic ‘white label’ car and added a Ford badge to it the value might be X, but if the branding was replaced by a Volkswagen badge, the value might be X + 10%.
Today, a more popular metric to encompass all the intangible assets of a business is Enterprise Value (EV), with EvD being a specific subset for the value of data.
Brand value and Enterprise value are diminished by cyber-attacks.
In our Slideshare presentation titled The real cost of ignoring network security, we show the average cost for a data breach as being $585,892, according to research by Dell.
Of course there are many tangible costs involved in repairing a cyber breach. There’s the physical time involved by IT personnel (check our Slideshare presentation for more details), potential legal fees, and the loss of productivity whilst dealing with the fallout from customers.
But with something so uniquely intangible as data, it’s not surprising the intangible metrics like brand value and enterprise value are going to take a big hit when a company is hacked.
Returning to the generic car branding example, adding a Volkswagen badge might have added 10% to the vehicle’s value before the emission scandal, but only, say, 3% immediately after the emission scandal.
Similarly, companies like Sony and Ashley Madison would have suffered a significant decline in their brand value after their hacking experiences, due to a reduction in customer trust. The point is that bad news has a direct effect on brand value and, therefore, EvD enterprise data value.
Customers give companies EvD Enterprise Data Value because of trust.
There are strict regulations worldwide regarding the gathering, storage and use of data.
And things are getting stricter. In Europe, the proposed Network and Information Security (NIS) Directive initiative means that companies could be fined up to 2% of their turnover if they allow customer data to be hacked.
But the collective goodwill that consumers express when they trust a company with their data can quickly evaporate in the event of a data breach. And as companies use EvD to gain a competitive advantage, they rely on that trust to fuel innovation and shareholder value.
As an example of how intangible values like brand and EvD can change quickly, take the case of Nokia. In 2009 (link below), Nokia was the world’s 5th most valuable brand with a worth of $45 billion. By 2016 (link below), Forbes didn’t even list Nokia in the top 100 most valuable brands.
Interestingly, those same tables showed Apple at #20 in 2009, with a brand value of $15 billion, but at #1 in 2016 with a brand value of $154 billion.
The purpose of those two examples is to show that brand values, like enterprise value, are based on emotion and perception … and so are very much at the whim of public perception.
More specifically, UK mobile operator TalkTalk (Daily Telegraph link below) was hacked in 2015 and is estimated to have lost 100,000 customers in the months after their personal data was compromised. That’s 100,000 people who now have a negative brand perception of the company, and TalkTalk estimate the total tangible and intangible cost of the hack was UK£60 million (67m euros). To add to the company’s brand perception woes, it also received a high profile, record fine from the UK’s data security regulator.
In another specific example of how cybersecurity – or the lack of it – can influence enterprise value, Verizon are reported by Investor.com (link below) to have reduced their offer for Yahoo! by $1 billion. This follows closely on the news that Yahoo! has had 500 million emails hacked, which indicates a direct cause-and-effect link between network vulnerabilities and company value.
Protect your EvD Enterprise Data Value with SecludIT Elastic Detector.
Our Slideshare presentation (link below) shows that 86% of CEOs rank cyber security as the issue they are most concerned about (source: KPMG).
But now companies of all sizes can use the Elastic Detector solution from SecludIT to protect their brand and EvD value.
As a very quick overview, Elastic Detector:
– Checks for over 60,000 network vulnerabilities.
– Gives the C-suite a Key Risk Indicator score.
– Gives the CISO a prioritized fix plan.
– Gives IT teams detailed remediation tips.
– Provides all the above benefits in a morning.
– Works on cloud and physical networks.
– Is fully supported by SecludIT experts.
– Carries out subsequent daily checks in the background.
Enterprise value and cybersecurity. Research reports.
The real cost of ignoring network security.
Huffington Post. NIS Directive.
Carrots and Sticks: Can Europe Strike the Right Balance for Effective Cybersecurity?
B2B market research : brand value list.
World’s most valuable brands in 2009.
Forbes : brand value list.
World’s most valuable brands in 2016.
Harvard Business Review.
Do You Know What Your Company’s Data Is Worth?
TalkTalk hit with record fine for cyber attack.
Verizon Seeking $1 Billion Yahoo Price Cut; Will Yahoo Investors Care?